Wednesday, December 20, 2017

History suggests the GOP tax reform celebration will be short-lived

by Patrick Murray

Bookmark that photo of Republican lawmakers gathering at the
White House today to celebrate their first major legislative victory of the
Trump era. If history is any guide, many of them may be on their way out this
time next year.

As others have documented, including Harry Enten at 538, the just-passed tax reform bill starts out life as the least popular tax legislation
going back to at least 1981. Tax HIKES in 1990 and 1993 got better reviews. For
the record, the Monmouth University Poll
puts public opinion of the current package at 26% approve and 47% disapprove.

Polling shows that the public feels the package was mainly designed
to benefit the wealthy rather than the middle class. Republicans, and Pres.
Trump in particular, currently suffer a credibility deficit with the middle
class. Based on Trump’s rhetoric that he would put average Americans first, fully
66% of the public believed when he took office that the middle class would benefit
from a Trump administration. That opinion has flipped. Currently, a majority of
53% say that middle class families have seen no benefit at all from the president’s
policies to date.

Importantly, fully half of the American public believes that
their own federal taxes will increase because of this new tax reform package.
Only 14% expect that their taxes will go down. In reality, many more than
1-in-7 taxpayers will see at least a nominal decrease. This reality is what GOP
lawmakers are banking on when they face the voters next year.

But politics – and voters’ decision-making process – isn’t always
based on reality. It is, however, always based on perception. And based on
historical perception metrics, the short-term future doesn’t look quite so
bright for the bill’s proponents.

Even though voters won’t feel the full impact of this tax
cut until they file their returns in early 2019, they should get a small
increase in their net take-home pay when the IRS adjusts the withholding tables
in the next few months. Will this be enough to turn around public opinion?
History says no.

For example, the 2009 stimulus package included tax cuts for
nearly all taxpayers that was reflected in an increase in net take-home pay.
Most Americans didn’t notice. A University of Maryland/Knowledge Networks survey conducted in November 2010 found that a majority of the public (52%) did not think
the stimulus bill included any tax cuts at all. In fact, 39% said their own federal
income taxes had gone up and 48% said they hadn’t changed. Just 9% said their
taxes had gone down – a perception that was far from the “reality” of nearly 95% of Americans whose taxes were decreased.

The Tax Policy Center estimates that the mid-point increase in net income for the current package will
be about 1.6%. My rough back of envelope calculations suggest that this might amount
to anywhere from $25 to $50 extra in the biweekly paycheck of someone earning
$60,000. I’m not convinced this amount will be perceived as significant by many
voters.

Of course, the IRS could always release new payroll tables that
significantly under-withhold federal taxes. This would mean taxpayers end up
owing money to DC when they file their 2018 returns – but that would happen
months after the midterm elections. Barring that type of manipulation, though,
the net increase is unlikely to be seen as significant if at all.

In the end, we have a tax package that starts out in a very
deep negative public opinion hole. Couple this with the prospect that the net take-home
pay impact is likely to be perceived as immaterial. It does not look very
likely that public opinion on this legislation will turn around in the next 10
months or so.

P.S. The 12 House Republicans who voted against the tax bill
should not get too confident that they’ve inoculated themselves from any fallout
in the upcoming midterms. In 2010, the ACA was the hot button issue and nearly
three dozen Democrats decided to buck their party and vote against it. Of the
30 who ran for reelection that year, 17 lost. By 2013, only 6 of the original
34 Democratic nay votes remained in the House.

2 comments:

I am a graduate of Monmouth University and am very disappointed in your very liberal comments against our president. Please keep your political opinions to yourself and understand that we do not all agree with you. You should be more inclusive.